The writer is a fellow at the American Enterprise Institute, a think-tank
Globalisation has been good for companies in at least one important way: it has allowed businesses to scour the world for talent. Though it would have been a rarity half a century ago, today a foreign-born chief executive is unremarkable. Pepsi, for instance, is run by a Spaniard, Ramon Laguarta. India-born Satya Nadella leads Microsoft and easyJet’s chief, Johan Lundgren, is a Swede. In the UK, 46 per cent of FTSE 100 chief executives were foreign nationals in 2018.
But the era of borderless enterprise may be past. Geopolitical tensions are rising, leaving business in the line of fire. Suddenly companies’, and executives’, nationalities matter again.
Executives’ supposed allegiance is to their shareholders, but as geopolitical confrontation intensifies, the matter of national allegiance will resurface. The chief executive of one globally operating European company told me recently that he is beginning to look differently at his top team, who were recruited from around the world. “Can we have peace in the company when the world is in turmoil? All of the confidentiality issues may start to look a bit different,” he said.
Executives may consider themselves citizens of nowhere, but a business can be harmed because of where it is based. That was evident at this year’s Davos World Economic Forum, where the Covid-19 pandemic forced the suspension of in-person meetings. To his virtual audience, President Xi Jinping of China warned against threats or intimidation towards others, though Beijing has imposed punitive tariffs on Australian winemakers and has appeared to put pressure on the chief executive of telecoms group Ericsson to lobby for Huawei in Sweden.
In March, after the US, EU and UK imposed sanctions on China over the treatment of Uyghur Muslims, Beijing accused H&M and Nike of “boycotting” cotton produced in Xinjiang. Chinese online maps and retail websites removed the brands and Huawei suspended downloads of the brands’ apps.
Corporate strategy may be affected too. In an interview in 2007, the former German chancellor Helmut Schmidt recounted how, shortly before the Iranian revolution, Mohammad Reza Shah’s government wanted to buy a stake in Daimler-Benz. “The ayatollah was waiting in Paris, and it was obvious that there would be a change of power . . . I found it inappropriate that the pearl of German industry, which is what Daimler-Benz was, would end up in Iranian hands,” Schmidt said. He asked Deutsche Bank to buy the stake: “I said, it is in the patriotic interest that you buy this stake . . . And because they were good patriots, they did.”
Similar situations could occur again today. Global boards and foreign-born executives might be less inclined to help than the “patriotic” German-led Deutsche Bank was in the 1970s. Alternatively, they may believe that in the 2020s leaders of western companies should be loyal not just to their shareholders but to the company’s home country if it provides democracy, rule of law and a safe business environment.
There is a risk that foreign-born decision makers may have a strong allegiance to their country of origin, one that puts them at odds with their company. Consider the $1.2bn California-based space transportation start-up Momentus, which recently parted company with its Russian chief executive and co-founder Mikhail Kokorich over US national security concerns. Kokorich had not been granted a licence for access to controlled technical information or hardware, according to a Securities and Exchange Commission filing.
The fact that some countries aren’t getting along doesn’t mean businesses should discriminate against certain nationalities. But it does mean that they should get used to a reality in which they can be attacked as country proxies. Business leaders may wish to revise the Davos world vision of vanishing borders and nationalities.
Source: Economy - ft.com
